Bets on higher U.S. Treasury yields hurt dollar funding Market

Bloomberg has said that bets on rising U.S. yields “are adding to pressure on interest rates in the short term funding market”, where corporate cash holders make overnight loans by Treasury securities as guarantee.

Yields on two-year notes tipped 0.44% this week, the highest level in a year, while investors still assess Federal Reserve’s intentions concerning rate hikes.

Demand has surged to borrow the newest Treasury bills for short positions and that drove the interest rate on overnight cash loans backed by the security to the special rate of minus 0.55%, according Oxford Economics.

It is noteworthy that for loans guaranteed by non specific Treasuries, the general collateral rate was 0.02%.